A portion of a company's profits distributed to shareholders, typically as cash payments. In India, dividends are taxable in the hands of the recipient at their income tax slab rate.
A dividend is a distribution of a portion of a company's earnings to its shareholders. Most Indian companies that pay dividends do so on a per-share basis - for example, Infosys declaring a "final dividend of Rs 20 per share" means every shareholder receives Rs 20 for each share held on the record date.
In India, companies declare dividends as a percentage of Face Value or as a specific amount per share. ITC, a consistent dividend payer, might announce "675% dividend" which means 675% of its Rs 1 face value = Rs 6.75 per share. Coal India announcing "Rs 15 per share dividend" on its Rs 10 face value is a 150% dividend. Companies may pay interim dividends (during the fiscal year) and final dividends (after the annual results, subject to AGM approval).
The Ex-Dividend Date is crucial for dividend eligibility. To receive a declared dividend, you must own the shares before the ex-date. On the ex-date, the stock price adjusts downward by approximately the dividend amount (a stock at Rs 500 with a Rs 10 dividend would open around Rs 490 on the ex-date). This adjustment prevents arbitrage but often creates short-term buying opportunities as the price recovers.
Post the Finance Act 2020, dividends are taxed in the hands of shareholders at their individual income tax slab rates (the earlier Dividend Distribution Tax paid by companies was abolished). For someone in the 30% tax bracket, a Rs 10 dividend effectively becomes Rs 7 after tax. Additionally, TDS at 10% is deducted if total dividend income from a company exceeds Rs 5,000 in a financial year.
Dividend-paying stocks are popular among Indian retirees and income-seeking investors. Companies like Coal India, NTPC, Power Grid, and ITC have long histories of consistent dividends. The Dividend Yield metric (annual dividend / share price) is the standard comparison tool. Yield read in isolation can mislead - a 10% yield might indicate that the stock price has crashed rather than that dividends are generous. Quality dividend stocks combine moderate yield (3-5%) with consistent payout history and growing earnings.
India Context
Dividends taxed at recipient's slab rate (post Finance Act 2020). TDS at 10% above Rs 5,000 from a single company. Interim + final dividends common. Dividends often declared as % of face value.